With the real estate market in the country reeling under the liquidity crisis, the government has taken few measures to ease out the pressure. However, the realty sector might not be able to witness a turnaround as slowdown fears grip the Indian economy.
Given India’s consumption slowdown across industries, sentiments among real estate sector’s stakeholders have only worsened in the second quarter, a survey by consultancy firm Knight Frank, industry bodies Federation of Indian Chambers of Commerce & Industry and National Real Estate Development Council (NAREDCO) found. Further, the stakeholders have downgraded the outlook for the ongoing six months to ‘pessimistic’ in the Real Estate Sentiment Index Q2 2019.
“The overall slowdown in the economy, coupled with factors like the NBFC (Non Banking Financial Company) crisis, developer defaults and bankruptcies, have slackened the sentiments of the sector, especially for the residential segment. The situation is further compounded by factors like the ongoing liquidity crisis and a diminutive demand scenario,” Knight Frank said.
While the government has already taken some measures to ease out liquidity crisis for the sector, slowdown in consumption, lower investment and fears of job loss is likely to keep many homebuyers to refrain from making any long-term financial commitments.
“The package by the government is too little and very late. Stalled works are just the tip of the iceberg. The larger danger is approaching. The financial sector fears that with defaults and lack of sales, roughly Rs 1.5 lakh crore worth of loan to this sector is in danger of turning into NPA (non-performing asset). If there is no intervention, things will go out of hand,” a senior banker told this publication requesting anonymity.
Meanwhile, this is the slowest growth rate of Gross domestic product (GDP) since 2014-15. The previous low was 6.39 per cent in 2013-14 following which the Narendra Modi government came to power in 2014. Global rating agencies including International Monetary Fund, DBS Bank and Asian Development Bank have lowered India’s GDP outlook. Recently, the Reserve Bank of India downgraded the growth forecast of the country from 7 to 6.9 per cent.
“Liquidity being the oil of the India’s growth engine needs a quick fix resolution enabling the Indian real estate to play its role in enhancing GDP growth in tandem with ample job creation. As known globally, real estate and infrastructure development have proved to be the economic drivers, Indian stands no different,” said Niranjan Hiranandani, president, NAREDCO.
Real estate research firm Liases Foras said the unsold inventory stands at 42 months.